The gold story - essentially - is that the rising economic powers of Asia,
the Middle East, and the commodity bloc are rejecting Western fiat
currencies. China, India, and Russia have all been buying gold on a large
scale over recent months.
Why should that stop when the AAA club of sovereign debtors is pushing
towards the danger threshold of 100pc of GDP?

These new players account for almost all the accumulation of foreign
currency reserves worldwide over the last five years, so what they do
matters enormously.

Mr Jen said China alone accumulated $150bn in reserves in the third quarter,
pushing the total to $2.3 trillion. These are colossal sums. China is
amassing almost as much each month as the United States ($63bn) has built up
in the entire history of the country. True, the US understates the value of
its gold, but you get the picture. Something big is going on.

So far, China has just 1.7pc of its reserves in gold, or 34m troy ounces. I
was told by a top Chinese official that they are buying on the dips so as
not to crowd out the market, which means of course that gold cannot "crash"
unless you think China itself is going to crash - or stop building reserves
(which is possible: Albert Edwards from SocGen says China may be in current
account deficit next year, leading to a yuan move - down, not up).

Best Regards

Tom.